When the New Year rolls around, Maryland hospitals will charge the same prices for the care they deliver as they did at the end of 2013, a state commission decided Wednesday.
The seven members of the Health Services Cost Review Commission, which sets the rates, accepted their staffers’ recommendation to extend the current rates into the new year.
The last increase was set in June at 1.65 percent for most hospitals for a six-month period instead of the entire fiscal year. Psychiatric hospitals were given an increase of 1.8 percent. Wednesday’s decision simply extended that increase through June 30, the end of the fiscal year.
The commission also approved the continued funding for development and implementation of Maryland’s health information exchange, which enables authorized health care providers to access a statewide database of patient information, such as medication histories and hospital discharge summaries.
The HSCRC agreed to provide a maximum $2.5 million a year over the next five years to support the exchange, which was created in 2009 and is called the Chesapeake Regional Information System for our Patients, or CRISP. The state generates the funds by building a small extra charge into hospital rates.
Back in June, hospital executives had hoped for an increase. But this week they were not expecting any change to the status quo.
Even though the Maryland Hospital Association supported the HSCRC’s decision to extend the current rates, representatives reminded the commission that as a group, Maryland hospitals’ finances are somewhat rocky — and have been for some time.
The financial condition of hospitals is one of several factors the HSCRC is supposed to consider when setting rates, and Michael Robbins, the MHA’s senior vice president of financial policy, said Wednesday that he remains concerned about hospitals’ balance sheets. He implored the commission to revisit the standards used when evaluating whether hospitals are operating efficiently.
“[We need] a better understanding of what is considered a reasonable financial condition,” Robbins said.
The commission tends to use profit margins as the go-to metric when evaluating hospitals’ financial condition, but the MHA usually points to operating margins, which hospitals consider a better representation. Profit margins have been improving, while operating margins are still negative for almost half of the state’s hospitals, Robbins said.
The average hospital operating margin is 0.8 percent, which is well below the efficiency target set by the HSCRC. Robbins said he would like more clarity about whether those targets are still appropriate.
Usually, the commission sets rates for the entire fiscal year, but when the panel met in June, it made the rate temporary — and decided at the time to revisit the issue this month — because of unusual turmoil in the world of hospital reimbursement that led to intense disagreement among stakeholders over how much prices should increase.
The turmoil is rooted in Maryland’s unique hospital payment system. Maryland is the only state with a rate-setting panel, thanks to a decades-old agreement with the federal government called the “Medicare waiver.”
The waiver has proved fruitful for the state’s health care providers, and it’s been a good deal for consumers, too. But because of the way the waiver system is structured — it uses outdated metrics to measure Maryland hospitals’ performance — the system no longer works as well as it used to, and those benefits are in jeopardy.
To address the issue, state officials have submitted a proposal to the federal government to modernize the waiver system. If the proposal is approved, it would mean an overhaul of the current model for paying hospitals.
Maryland is still awaiting word from the federal Centers for Medicare and Medicaid Services (the agency that administers the Medicare waiver) about the proposal. Officials have recently said they’re confident CMS will approve the plan, and are preparing to implement a vast array of new policies, but back in June, there was much more uncertainty.
Officials were worried that raising rates too much would signal to CMS that Maryland’s hospitals aren’t capable of operating efficiently. If CMS got that impression, state officials worried, the agency might not approve Maryland’s waiver modernization proposal and might even scrap the unique agreement altogether.
That’s why the HSCRC decided to raise rates by just 1.65 percent, less than hospitals had requested. Many hospital executives testified at the time that a 1.65 percent increase would cause further deterioration of their flimsy balance sheets. But, commissioners said, those concerns were outweighed by the dire need to preserve the Medicare waiver, which means avoiding large rate hikes for hospitals.
This week, though, there was no heated debate; Robbins was the only hospital representative to testify, and he spoke only briefly.
When asked after the meeting why the MHA supported the rate increase even though concerns remain about financial stability, Robbins said it was simply more important to foster a “spirit of collaboration, cooperation and compromise” as the state transitions to the new Medicare waiver and implements new payment systems.